20% deposits are now required to access the Kiwibank
8,49% and National Bank 8.3% short term fixed rate
mortgages, No mention is made of the likely more stringent
loan to annual income ratios, which will be further limiting
the availability of mortgages.

“Then the
question needs to be asked – ‘If previously they were
lending on artificially inflating house prices, where
household income was either of little or no consequence –
what do they lend on now – in an environment of declining
house prices?. It can’t be ‘assets’ any longer of
course – because they don’t know what these will be
worth going forward.

“It simply has to be income
– as it should have been all along – had there not been
these massive regulatory failures at both national and local
level.”

“The urban inflation we have seen in
too many markets over these past few years has been
‘unprecedented’. To gauge the extent of the inflation
component – one would need to adjust current pricing back
to a reasonable Median Multiple of
2.7……………..’

“It is not a pretty sight
– and should have been ‘obvious’ to politicians,
bankers, regulators, economists, property professionals,
urban planners and others ten and twenty years
ago.”

“It needs to be borne in mind too –
that as markets ‘adjust’ – they do not simply move
casually and conveniently back to their ‘equilibrium
value’ – but tend to ‘overshoot’. (The current
US situation is a further illustration of what could not be
described as “casual and convenient”)

“It is
difficult to accept the idea that somehow this adjustment
can be ‘gentle’ as the criteria for debt financing moves
rather quickly from that based on ‘ever inflating
values’ to the ‘tried and true’ historical convention
of lending based on income – which has been at 2,5 to 3.0
times (and slightly higher) gross annual household income
and no more than 80 – 90-% of the “true worth” (not
artificially inflated pricing) of the property being
secured. It seems likely that ‘assets’through this
adjustment phase will be considered secondary to
incomes………….”

The only decisions politicians need to
make at Federal / National and States and Local levels is
–(a) do they wish to stand idly by and allow their housing
construction industries and jobs to collapse – and
compound the problems - to Californian and United Kingdom
levels (less than 40,000 units annually in Australia’s
case– 8,000 in New Zealand’s case) – or - (b) act
constructively and quickly to open up fringe land and
responsibly debt finance infrastructure to allow affordable
fringe housing to be built as soon as possible.

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